The purpose of this paper is to examine the potential for salary-based policies to generate a more equitable distribution of teachers characterized by strong qualifications across schools. The analysis is based on rich longitudinal administrative data on teachers and schools in the state of North Carolina. The authors' analysis first confirms the findings in the extent literature that teachers are reluctant to remain in schools with high proportions of nonwhite students, even after they control for the proportion of students eligible for free lunch. Second, they find that in making their decisions to leave a school, teachers are quite responsive to salary differentials. Taken together, these results suggest that salary differentials are potentially useful as a tool for retaining teachers in the schools serving disadvantaged students. Importantly, however, the authors find that teachers with the stronger qualifications are both more responsive to the racial characteristics of the students and less responsive to salary differentials than are their counterparts with weaker qualifications. As a result the salary differentials required to retain the teachers with strong qualifications are far larger than those for weaker teachers.